Econ Test 1

Diminishing marginal utility

Each additional unit of a item purchased gives less marginal benefit than the previous unit, therefore, the only way I'll pay is if the price is lower

In a mixed economy, what to produce and how much to produce are determined by

Markets and the government

Example of inferior goods

More income means less demand for cheap ramen noodles

Example of normal goods

More income means more demand for jewelry

Population

More population means more demand, less population means less demand

Elastic

Percentage change in price causes a larger percentage change in quantity demanded

Inelastic

Percentage change in price causes a smaller percentage change in quantity demanded

Unitary elastic

Percentage change in price causes an equal percentage change in quantity demanded

Taste and preferences

-affected by advertising, trends, health considerations

Changes in the following cause the entire demand curve to shift

-tastes and preferences -related goods -income -population -expectations

the opportunity cost of producing 1 unit of herring for sweden is

1/10 unit of cell phones

the opportunity cost of producing 1 unit of herring for finland is

1/5 unit of cell phones

the opportunity cost of producing 1 unit of cell phones or sweden is

10 units of herring

If two coats are currently being produced, the opportunity cost of producing the third coat is

15 belts

According to the graph below, if a country is currently producing at point X, the opportunity cost of producing another consumer good is

20 capital goods

the opportunity cost of producing 1 unit of cell phones for finland is

5 units of herring

The 18th century enlightenment philosopher who wrote "the wealth of nations", which included the idea of the "individual hand", was

Adam smith

Example of population

As the population of girls increases, the demand for makeup increases

Related goods

Complements that work together

What happens when consumers income decreases

Demand for inferior goods increases (low income means demand for spam)

Example of taste and preferences

Demand for long dresses increases when prom season begins

Each of the following is a factor of production EXCEPT

Girl shopping for shoes

Rita also likes to wear read lipstick and blue eyeshadow. The red lipstick is a

Good

Complements

Goods/services used in conjunction

Which of the following is true according to the circular flow model?

Households are demandersin the product markets and suppliers in the factor markets

For an economy with a straight-line production possibilities curve, which of the following must be true? I. The opportunity cost of producing another unit is constant II. Resources are completely adaptable to alternative uses III. Resources are used efficiently

I and II

An opportunity cost is entailed in which of the following decisions? I. A student decides to attend college full-time II. A family uses its $20,000 savings to purchase an automobile III. A farmer decides to grow more wheat and less corn

I, II, and III

On the basis of the diagram below, showing an economy's production possibilities curve for two goods, which of the following statements must be true? I. The opportunity cot of moving from point P to point R is 10 units of Y II. The opportunity cost of moving from point R to point P is 8 units of X III. The opportunity cost of moving from point Q to point R is 0 units of Y

I, II, and III

changes in which of the following factors would affect the growth of an economy I. quantity and equality of human and natural resources II. amount of capital goods available III. technology

I, II, and III

Expectations of future price changes

If consumers expect prices to rise in the future, then demand increases now

The best combination of belts and coats for this economy to produce is

Indeterminate with the available information

Resources are also known as

Inputs

When there's a decrease in demand the demand curve shifts to the __________

Left

How does price not change

Price elasticity of demand

When there's an increase in demand the demand curve shifts to the _________

Right

Which of the following is a correct example of marginal analysis?

The added benefit of producing more dresses exceeds the additional cost of producing them

The study of economics is primarily concerned with which of the following?

The allocation of scarce resources, given unlimited wants

Goods are scarce if and only if

The amount of people want exceeds the amount available at a zero price

Monica likes to wear red lipstick, and she always wears blue eyeshadow whenever she has red lips. A resource for the eye shadow is

The person who makes the eye shadow

Law of demand

The price of an item determines the quantity demanded

Substitution effect

When apples are more expensive and their substitutes (pears) are cheaper, customers buy less apples

Income of consumers: inferior goods

When consumers income increases, demand for inferior goods/services decreases

Income of consumers: Normal goods/services

When consumers income increases, demand for normal goods/services increases

Income effect

When goods are expensive, money buys less. When goods are cheaper, money buys more

Example of complements

When the price of fishing poles increases, the quantity demand decreases. Therefore, the demand for its complement, lures, decreases (price for lures does not change)

Demand curve moves only on the ______ axis

X-axis

The quantity is always on the _______ axis

X-axis

The price is always on the _______ axis

Y-axis

the "other things equal" assumption means

all relevant factors (independent variables) except one remain *unchanged* when studying an economic effect

sweden has a comparative advantage in producing

herring only

sweden has an absolute advantage in producing

herring only

the PPF illustrates that

if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced

the fact that a society's PPF is curved demonstrates the law of

increasing opportunity cost

all points inside the PPF represent

inefficient production points

opportunity cost

is measured by how much of one good/service a person has to forgo in order to get some stated amount of another good/service

finland has an absolute advantage in producing

neither cell phones or herring

all points outside the PPF represent

non-feasible production points

the long-run growth rate of an economy will increase (the PPC will shift out) by an increase in all of the following EXCEPT

real interest rate

a decline in the available natural resources will cause the PPF to

shift inward

a production possibility frontier (PPF) shows

that choosing to produce one good implies sacrificing production of other goods

when ina decides to buy a $200 pair of high heels instead of a $400 dress to wear to the prom, her opportunity cost is

the dress

a PPF illustrates the - facing an economy that - only 2 goods

trade-offs; produces